Chip Shortages Drive Electronics Prices Higher

Inflation Spills Over Into Electronics

Global semiconductor shortages have caused price increases for everything from computers to cars. Soon smartphones and electronic devices may be added to the list. With demand surging and key materials for chipmaking in short supply, semiconductor companies are raising the prices they charge electronics manufactures. Those vendors are in turn starting to pass on the price increases to consumers.

This is already happening in the PC and printer market. Hewlett-Packard (HPE) recently increased prices of its PCs by 8% and printers by 20%, citing component shortages. Dell (DELL) said it adjusts its prices based on component-cost increases. If chipmakers continue to raise prices, consumers could face higher costs for other electronics.

Chip Making Material Shortages

Semiconductor companies say they have no choice but to pass on the increased cost for chip-making materials to their buyers. The price increases are across the board, touching everything from silicon wafers to resins and metals. Digi-Key Electronics (TK), a large electronics component distributor, raised prices on chip-related components 15%, with some up 40% or more.

Microcontrollers, which are sometimes called the brains for gadgets, appliances, and vehicles, are up 12% since the middle of last year while computer memory chip prices have climbed 34% since the start of 2020. NVIDIA (NVDA) graphic cards are selling on the secondary market for more than the list prices.

The Impact of Broader Inflation

Consumers may be paying more for a laptop or printer at the moment, but the price increases are not bad when compared to what is taking place in the broader economy. Inflation is rising as the economy grows again and pandemic supply-chain disruptions continue.

Prices for computers and electronics were up 2.5% year-over-year in May. Prices across the board were 5% higher, fueled by rising energy costs. Even vehicles have not been immune. Car makers have curbed production because of chip shortages, driving up the price of new vehicles at the same time as demand rises. Semiconductors are essential for a variety of devices people use in their daily lives. As the costs of producing chips increase, consumers can expect to pay more for their electronics.

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